Second Trump University Class Action Proceeding to Trial

August 04, 2016

Class action trials, a rarity in Canada, are now set to proceed in two separate U.S. District Court cases involving U.S. Presidential candidate Donald Trump and "Trump University". In a decision released this week, Judge Gonzalo P. Curiel denied Trump's motion seeking summary dismissal of Cohen v. Trump, a certified class action on behalf a nationwide U.S. class claiming damages against Donald Trump (personally) for alleged breaches of the Racketeer Influenced and Corrupt Organizations Act ("RICO").

Background

From 2007-2010, Trump University ran a series of real estate investment education programs and live seminars, costing up to $35,000 each. The plaintiffs allege that the programs and seminars failed to deliver on their advertised promises, and constituted a fraudulent scheme. The RICO cause of action is grounded in the fact that some of Trump University's allegedly false advertising was circulated by interstate mail and interstate electronic communications. Trump's personal liability is rooted in the fact that several of these messages quote Trump, were purportedly authored by Trump, or were allegedly approved by Trump.

Cohen is the second of two Trump University class actions now set to proceed to trial. The first is Low v. Trump University (discussed in an earlier post), which advances various causes of action under California, New York and Florida state law, including for negligent misrepresentation and for breaches of consumer protection laws. Both cases are being argued by the same plaintiff counsel, and are assigned to the same judge.

Canadian Perspective

From a Canadian perspective, Low is the more traditional of the two class actions, as it parallels the type of deceptive marketing class action commonly brought in Canada. There is no analogue to RICO's "mail and wire fraud" cause of action in Canada, which is perhaps most recognizable to Canadian lawyers as a plot device from John Grisham's legal thriller, The Firm (in which the main character takes down a mafia-affiliated law firm with evidence that they overbilled clients--and sent the invoices by mail).

The RICO cause of action provides three significant advantages over the more traditional deceptive marketing causes of action. First, as a cause of action under a federal statute, it simplifies the certification of a national class. In Low, the court was only willing to certify subclasses from three specific states, due to inconsistency between state laws. Second, a successful plaintiff claiming under RICO is entitled to recovery of triple their damages (i.e., "treble damages"), a concept wholly foreign to Canadian law. And third, RICO expressly authorizes claiming against the principals of a company personally (i.e. "piercing the corporate veil"). This means that the plaintiffs in Cohen can claim more money than in Low, on behalf of a much larger class, and that Trump will have to answer for any judgment from his own personal assets (which are presumably more substantial than those of the defunct Trump University).

Reasons for Refusing Summary Judgment

Summarized briefly, Trump's motion for summary judgment to dismiss the action was based on four alternative arguments: (1) that Trump's personal involvement was not sufficient to trigger personal liability; (2) that RICO, originally enacted to deal with organized crime, did not apply to ordinary consumer advertising; (3) that the Trump University advertisements were not materially inaccurate, and (4) that anything that was technically inaccurate was "mere puffery", and therefore unlikely to be relied upon by consumers.

Plaintiffs' counsel responded to the motion with colourfully worded written arguments, confidently criticizing Trump's motion as out of touch with reality. The plaintiff's introduction concludes:

"Trump wrote his motion for summary judgment for a District Court in Bizarro World. In this District Court, however, it is wholly without merit. Plaintiff respectfully requests that the Court deny Trump's motion and set this case for trial as quickly as possible. On earth. In the Southern District of California."

Judge Curiel, in much more diplomatic terms, largely agreed. He did not make any final determinations of fact, but he held that the plaintiffs had marshalled sufficient evidence to warrant a trial. He found that there was a genuine issue as to the degree and nature of Trump's personal involvement, and as to the accuracy and materiality of the representations made in Trump University's marketing materials. A series of U.S. Supreme Court decisions had already directed that RICO should be interpreted expansively, and that it did not apply only to "mobsters".

The dismissal of Trump's summary judgment motion clears the way for a trial. The next stage of the proceeding will likely be a pre-trial conference. A date has yet to be fixed. The Low class action is scheduled to proceed to a jury trial beginning November 28, 2016.